This will be the last market report from me for some time. I have a bootcamp tomorrow then on Friday I fly to Bali for two weeks to eat, trade, teach and live. The next report will be on Oct 22nd.
What a fun interesting day yesterday, although the volatility wasn’t as high as I expected. The ¥ certainly strengthened and the Aussie too on the back of the Japanese raising sales tax, Chinese PMI holding steady, RBA also holding steady and the US on the brink of the cliff. I think gold’s move is the indicator to get long greenbacks now though; it was down $40/3%.
VIX had been rallying from 13 to near 18 but reversed that move by 6% overnight to close at 15.5. The VIX is basically a measure of insurance protection against major moves in the market, generally bearish moves, as it rallies more insurance is being bought against the predicted fall. So, with this coming off and gold too I see the flow of money is being bet that the US will raise the ceiling and avoid a default. They also see the US government shut down as a temporary minor issue, a hiccup. It is a big gamble to play and rather petulant by the Republicans, but then “politicians are a grown up straight laced lot” said no one ever.
A bit more fun out overnight with the ECB monetary policy and my mate Uncle Ben is chatting to some group in St Louis. Not in the formal seat this time but if he accidently sneezes the market will move.
DATA HIGHLIGHTS TODAY – AU Trade balance & Building Approvals. Spanish unemployment. UK Construction PMI. EUR Interest Rates & MONETARY POLICY. UNCLE BEN BERNANKE speaks at a conference.
AUDUSD – Whilst I have been waiting for this moment, a swing low off the 50ema, I don’t like it anymore. In fact, I am looking at the 4hr chart to get short. I did pull 60pips from it thanks to RBA yesterday but when looking at the other majors the Aussie is bucking the trend by going long against the greenback. All of the majors are turning the corner and starting to weaken against the US. Gotta love the underdog and I admire the pluck of it but I think it is a race the Aussie will lose.
EURUSD – Ran up on the open of the European markets and then never saw those levels again, collapsing back to the hourly 50ema. This set up a high test bar and if today’s is a LLLH then it will be testing 1.34 on Friday.
GBPUSD – Weakened on their manufacturing PMI and also setup a high test bar, 40pips from the big resistance and where I have said it is going since it bottomed in July, 1.63. Like the euro, another seller bar and I will be on board racing back to support at 1.5755.
NZDUSD – An engulfing seller bar, not a bar I would trade from. Looks lost again like it did at end of June.
USDCAD – My stoploss was saved by 2 pips, phew! Looking a lot stronger now but not out of the woods yet. A little confusing with 2 high test bars, followed by 2 low test bars and basically has spent 8 sessions faffing around 1.03. Still, there is a swing low and with a bullish mode on greenbacks starting this could break away from the mess and test 1.04, that’d be nice.
USDJPY – Still not interested with no clear trend. Just little point risking good money on trading this when it is going nowhere.
GOLD – It’s a strange world we live in when gold gets pummelled as the US look to increase their debt load. The shutdown is nothing compared to a default on the US debt, and that is the scary headlines hidden behind this shutdown. Bill Gross says this won’t happen, and he is the bond king, I hope he is correct.
David Long / Proprietary Trading Manager